Australia ‘off the radar’ for US tech investors

Australia is “off the radar” and often not considered by US technology firms investing in overseas markets, the local head of US provider Rackspace says.

Rackspace, a US technology service provider worth $US7.5 billion, has announced the launch of its Sydney data centre in an effort to win corporate and government clients.

Rackspace country manager Mark Randall said the company would lease a data hall with 1.4 megawatts of power from Digital Realty’s new Erskine Park facility in western Sydney. He added the deal was worth “tens of millions of dollars” over a 10-year period.

The move will provide Digital Realty with a valuable long-term anchor tenant for its Sydney facility. In February the New York-listed firm announced plans to spend $150 million developing two Melbourne facilities and it acquired the Sydney site for $US10.7 million in mid-2011.

Mr Randall acknowledged Rackspace’s construction of a local data centre was “later to the market” compared with local rivals such as Telstra and SingTel-Optus. He said his firm had not made the investment earlier because Australia was often seen as a less lucrative market than others.

“I wish it had been earlier of course,” he said. “I think Australia is often off the radar more than it should be in that . . . the technology world is US-centric so for most US tech companies what they’re hearing about is China, India and the big growth in those markets.

“Australia has not enough of the mind share, which I think is unfair. When you look at the share of the cloud services and IT services market, Australia is bigger than China or India.”

Rackspace’s decision to host its facility in Sydney followed lobbying by the NSW government, which is fighting its Victorian counterpart for the title of Australia’s leading IT state. Mr Randall said the office of Deputy Premier Andrew Stoner approached his company months ago.

Data centres act as repositories for information and are vital for boosting the technology sector of any state. Rising demand for internet services and cloud computing increases have led to providers including NextDC, Macquarie Telecom and Digital Realty pumping hundreds of millions of dollars into acquisition of sites throughout key capital cities.

The trend comes in spite of Australia’s higher property and labour costs compared to other global markets. Mr Randall said it cost much more to do business in Australia than overseas. “Our bandwidth [internet and data] costs are five times what they are anywhere else in the world and our labour costs are pretty much double,” he said.

Mr Randall also said establishment of local “onshore” facilities would lead to more deals with corporate and government clients concerned about tightening privacy legislation limiting the amount of personal information moved overseas.

“We recognise clearly that there’s business and requirements we’ve not been able to address, particularly in the corporate and enterprise market . . . also in government and financial services . . . where there’s a strong preference for onshore hosting,” he said. He added that data stored at the local facility would not be moved overseas without the client’s permission and a team would be kept on location to ensure technical support.